USD/CHF: Greenback Falls, Swissie Strengthens

The USDCHF currency pair trends lower today as fiscal issues hound the world’s largest economy. The US dollar falls to the Swiss franc on improved sentiment for the Swiss nation. It does not help the Greenback that International Monetary Fund Managing Director Christine Lagarde has said that global uncertainties, including the US fiscal negotiations, are continuing to weigh on growth.

The House of Representatives voted this week to suspend the $16.4 Trillion federal borrowing limit until May 19, removing for now the most contentious fiscal issue facing Obama. Republicans are trying to prompt the Democratic-controlled Senate to approve an annual budget, something it has not done in four years, by withholding lawmakers’ pay if a spending package is not passed by April 15.

Further, the unprecedented bond buying by Federal Reserve Chairman Ben S. Bernanke has pushed the Fed’s balance sheet to a record $3 Trillion. Fed policy makers have voiced increasing concern that record-low interest rates are overheating markets for assets from farmland to junk bonds, which could heighten risks when they reverse their unprecedented bond purchases.

Meanwhile as recently reported, economic expectations for Switzerland have improved by 8.6 points in January 2013, raising the ZEW-CS Indicator to a level of minus 6.9 points. This puts the sentiment indicator on track for the fourth consecutive month. Economic expectations also clearly overshoot previous year’s January value of minus 50.1 points. However, the majority of experts still expect the Swiss economic situation to remain unchanged over the next six months. Nevertheless, the assessments of financial analysts of the current economic environment in Switzerland improve by 9.4 points, reaching a level of 16.0 points. Compared to the value of minus 14.7 points in January 2012 experts’ evaluation of the economic situation is much more optimistic now.

Considering these fundamentals, a short position is suggested for the USDCHF today. However, be on the lookout for probable technical corrections.